What problems have prompted countries of Eastern Europe to move towards a more market orientated economic system?

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Year 12 Economics Essay

a) What problems have prompted countries of Eastern Europe to move towards a more market orientated economic system?

b) What problems have these countries encountered in the transition?

Economies try to solve the basic economic problem that exists in the marketplace. Scarcity of resources in a world of infinite human wants. This causes the basic economic problem; resources have to be allocated between competing uses. To solve the problem the Government has to decide what will be produced, how will it be produced and for whom will it be produced. The answers to these questions depend on what economic system a government decides to operate.

Countries in Eastern Europe wanted to move towards a more mixed economy which is a combination of market economies and command economies. In a command economy resources are allocated by the Government through careful planning. This means that the four factors of production (land, labour, capital and enterprise) are all controlled by the State. In market economy the government makes no economic decisions. These are made through the market which is the interaction between consumers and businesses.

In a command economy goods